Excel Tips for Growth Accounting

This document discusses the Microsoft Excel commands used during the growth
accounting demonstration presented in class.
Before manipulating the data, it is a good idea to organize the worksheet you will
be working with in Excel. The Freeze Panes command under the Window tab allows
you to scroll down and across large screen areas without losing your ability to see your
worksheets header (where the labels for the different time series will go) and side pane
(where the year for each data row is located). Next, type in headings for the columns and
parameter values used in the growth accounting. The headings might not seem useful
now, but they save time in the future when you return to your file after not having worked
with it for awhile. The labels we included in class were for the parameter values (alpha
and delta), new time series (capital stock, capital-to-output ratio, TFP, and the four
components of the growth accounting decomposition), calibration targets (initial capitalto-output ratio, average capital-to-output ratio), and the initial and updated guess for the
capital stock series.
Once the worksheet is organized, begin to type in the formulas corresponding to
the labels in order to manipulate the data. Letters denote columns in Excel, and numbers
denote rows. In order to type in a formula for a particular cell, click on the cell, type =,
and then type in the desired formula. A $ sign can be used to fix a particular cell in a
formula for an entire range of new cells. For example, when typing in the formula used
for TFP, the value for the parameter alpha does not change. If alpha resides in cell A2,
then type $A$2 when alpha appears in the formula for TFP. Now, once you drag the
formula for TFP to cells for subsequent years, alpha remains fixed as cell A2.
The main Excel trick used in the growth accounting involves calculating the
capital stock series. Type in a value for the initial capital stock. Your choice for the
initial value implies an updated value of the capital stock. Copy the new updated value
of the capital stock. Paste this value as the new guess for the initial capital stock by
clicking the Paste Special command under the Edit tab and pasting as Values.
Repeat this procedure by clicking and holding Ctrl+Y, the Repeat command under the
Edit tab.
Once the four series for the components of the growth accounting are calculated,
convert each series to a series relative to the first years data observation. For example,
to calculate the productivity series, 1970-2000, for Finland, divide each years data by
productivity in 1970 and multiply each years data by 100.
You should always present your results in a clear and professional manner. When
making graphs, eliminate unnecessary clutter (Excels legend and grid lines), provide
labels (each axis and all time series), and give the graph a title.